The train set gets another $750 million

The Government’s commitment to invest $250 million to support the KiwiRail Turnaround Plan will help increase New Zealand’s economic productivity and put us on the path to faster growth, Transport Minister Steven Joyce says.

The Budget 2010 appropriation is the first round of Government support for the objectives of the $4.6 billion Turnaround Plan.

The Government has committed in principle to a total package of $750 million over the next three years, with final decisions on funding subject to individual business cases.

“The KiwiRail Turnaround Plan is designed to see the rail freight business become sustainable within a decade by getting it to a point where it funds its costs solely from customer revenue,” says Mr Joyce.

“In fact, the lion’s share of the $4.6 billion will come from the business itself.

The Government really has little choice. One can’t sell Dr Cullen’s train set. No one would buy it.

The Greens complain not enough is spent on public transport such as trains. I guess they’ll call for even more than $750 million.

It will be interesting to see if KiwiRail can move towards break even. This subsidy should be regarded as full and final. If they can’t break even within a decade, then the for sale sign should go up.

mjwilknz

$750 million over three years? That’s a cost of over a 150 bucks for every man, woman and child in this country. I suspect that the benefit the great majority get from that cost will be close to a big, fat and round zero! Any takers to argue otherwise?

krazykiwi

The Government’s commitment to invest $250 million to support the KiwiRail Turnaround Plan will help increase New Zealand’s economic productivity and put us on the path to faster growth, Transport Minister Steven Joyce says.

Sideoiler

I wonder how long it will be before vehicle registration increases to help support rail, or the parliament passes legislation that prevents road cartage companies from carrying anything further than 160 kilometers

freedom101

Dr Cullen should me moved from Kiwibank to KiwiRail so that he can preside over the dog.

If you add the cost of KiwiRail up, including the gift to the Aussies, it much be close to $2000 per productive worker in the economy. For a start, children don’t work, neither do the retired, then exclude civil servants as they consume funds taxed from the productive sector. Well done Dr Cullen.

It was Kerry Packer who said that “you only get one Alan Bond in a lifetime”. I’m sure Toll say that “You only get one Dr Cullen in a lifetime”. The difference is that Alan Bond lost his own money whereas the venal Dr Cullen brided us with our own money and lost hundreds of millions in the process.

krazykiwi

I’m extremely pissed off at this. Our government is failing miserably to rein in spending. If this business is a dog, then call it a dog and put it up for sale. If the best offer is $1 them make sure voters are reminded of the treachery perpetrated by Cullen during his final days.

Jack5

NZ’s terrain is lousy for rail. A mountainous archipelago, the main islands separated by rough sea, earthquake-prone, with many rivers to form, a long, thin shape. Above all it is lightly populated, with really only one major population centre. The track gauge already laid is fairly narrow, and in some strategic places, such as the route into the country’s only really viable deepwater port, Marsden Point, the rail line (as far as it reaches) includes tunnels too narrow for handling shipping containers.

On the other hand, what country is more suitable for coastal shipping? Plenty of medium and small ports. In the past coastal shipping was prejudiced first, by unionism which frequently tried to ransom high wages in turn for not striking. With mechanisation, tiny crews allowing high wages, and the general weakening of unionism, this would be much less of a problem today.

Second, our coastal shipping was hammered by abandoning cabotage, or reservation of coastal rights to NZ firms. This probably killed off most of the remaining small local shipping lines. It allowed some cheap freight immediately, but what the country needs is long-life coastal shipping links to carry truck trailers and other heavy goods. This would relieve both road and rail maintenance, and slash need for road/rail infrastructure spending.

It’s time to have another look at coastal shipping. This wouldn’t entail the huge spending that’s being done on the rather shaky rail network.

James Butler

The Government’s commitment to invest $250 million to support the KiwiRail Turnaround Plan will help increase New Zealand’s economic productivity and put us on the path to faster growth, Transport Minister Steven Joyce says.

What absolute rubbish. What has Joyce been smoking?

Interestingly, that’s what some others thought when he advocated motorway building as a means to economic growth. At least now he appears (?) to have the numbers the right way around.

CJD

Despite what the Greenies would have us believe effective road and rail transport systems are not mutually exclusive. We could have both if there was less wastage in the tax system. The state of rail however is indicative of the winner-takes-all nature of our political system. The reds come in and scrap every policy brought in by the blues and vice versa. We need a stabilising influence in the form of a strong third party that can damp the inherent oscillations in the system. Then we will be able to set realistic long term goals on things like transport strategy without successive governments buying and selling the same asset.
In case I’m being too subtle-PARTY VOTE ACT

CJD

Hagues

The purchase price is now a sunk cost. No point throwing good money after bad. If its not going to make a good rate of return on the required capital to prop it up then just forget about the whole thing and save our money for something productive.

I just hope that all this investment pays off and the mission is eventually accomplished – a first world electrified train system.

From my travel experiences across Europe, Australia and the greater South Pacific Region I have always been appalled at the sub-standard state of NZ railway.
The previous owners saw no incentive what so ever to improve this asset – finally the government has seen the light.

New Zealand must have a 21st century transport system by the end of 2020, otherwise we are better off with the title ‘developing’ nation.
Some will argue that this title already applies today.

JiveKitty

Potential future infrastructural needs at a stretch maybe. But not run by these fucking muppets. Don’t know about the freight side which I would assume is covered well by other options but if it wants passengers, it needs to provide the service it says it will. They fail at contingency planning and suffer regular delays in the course of usual service, and not because of extreme circumstances usually.

James Butler

We need a stabilising influence in the form of a strong third party that can damp the inherent oscillations in the system. Then we will be able to set realistic long term goals on things like transport strategy without successive governments buying and selling the same asset.
In case I’m being too subtle-PARTY VOTE ACT

To paraphrase, your plan to stop the boat from rocking involves hanging a massive weight out to one side?

Nookin

Jack5
Interesting. Are there figures available for comparative costs? I rather like the idea of rail but in the South Island in particular, it is somewhat limited in scope. Rail can service the East Coast and from West Coast to East Coast but not many of the inland areas. Having said that, there is probably not a great demand to service inland areas. In the North island in particular, lines have been affected by natural disaster on a relatively regular basis but that may be lack of foresight rather than an incurable inherent weaknesses. I accept that the fact that I rather like the idea of rail for both passenger and goods does not necessarily make it economically viable.

wreck1080

JiveKitty

James Butler: On a proper scale, ACT are not so far right as you might think – if that is in fact what you are implying. New Zealand has a fairly compact spectrum. Furthermore, ACT balances out the Greens on that scale, although the Greens are probably more left than ACT are right.

JiveKitty

In the North Island, five to ten years ago the lines were regularly affected by the extreme summer heat that it gets. That’s what happens when you fail to maintain your asset. Arseholes. Probably didn’t even reach 40 degrees celsius.

CJD

James Bultler-you are right of course, Labour extreme left, National Left and ACT Centre-Right. A large liberal weight with high inertia (intergrity) is very good at damping oscillations to counter Labour Lies and National flip-flops.

tom hunter

Patrick Starr

“The Greens complain not enough is spent on public transport such as trains. ”

whereas

“A three-year, $750 million commitment by the Government to strengthen KiwiRail is not enough in comparison to the huge amount already committed to roading, says Labour’s transport spokesman Darren Hughes.”

thedavincimode

Does this make it $2 bill yet? I guess Joyce was left with a choice between realising the billion dollar loss or tossing good money after what was originally good money in taxpayers’ pockets but was converted into yet another shameless grasp for public support. The only good thing to come of it was the fact that it turned out to be yet another nail in the snearing little snot’s political coffin.

Freedom is right.

Give that odious and sanctimonious little prick the job of explaining away the gazillion bucks of wasted taxpayer dosh. On the positive side, with a rail system at his disposal, the frightful little shit would then be able to get that heavy duty chip carted away off his shoulder.

In addition, it is quite likely that the NLTF actually has light vehicle drivers subsidising heavy vehicles which do more damage to roads.

So we are pouring large amounts of money into subsidising the road transport of freight, which are an inefficient and dangerous way to transport freight, but when governments investing in a more efficient alternative (albeit at too low a level) the right wingers start screaming for us to sell off our rail.

What really should happen is we should stop subsidising road transport – rail would be a lot more competitive then. There would be better price signal about what transport actually costs the country – making locally grown or produced goods more profitable.

RRM

James Butler

I am all for stopping subsidies, of course that would mean that your $.5.00 train ride will now cost you $64.37 because the private motorist is no longer going to

…be able to afford the $35 toll for backing out of the driveway?

Srsly, check out the Onehunga branch for instance, which has a projected BCR of 3.1, with 85% of benefits going to road users. That’s what your “subsidy” can get you when transport projects are properly planned and funded.

Put it away

OTGO

IN the 6 months to Dec 09 kiwirail lost nearly $137,000,000. The Crown and Regional Councils funded Kiwirail to the tune of $259,830,000. Anyone in this thread who still thinks another $750,000,000 is worth it has rocks in their head.

Manolo

More of our money thrown at a ruinous investment.
Why has this government have to follow Cullen’s example in all this? It iidiocy of the highest order and further proof Neville Key’s government has lost the plot.

If a lemon, call it a lemon and quit at the earliest possible junction. Not what Joyce is doing.

The problem is that decades of underinvestment in maintenance and infrastructure (both by governments from yesteryear and by private enterprise who effectively asset-stripped it when it was privatised) mean that modest profit is nowhere near what is needed to fund the capital investment that it needs to be viable in future.

KiwiGreg

Nah toad the problem is with the size of New Zealand’s economy and the size and shape of the country rail will never be viable without subsidies (and therefore not viable) other than a limited number of point to point bulk freight runs.

Not like the full-on ideological mass powerchuck we are getting from most of the commentariat here.

When are you guys going to realise we went down the “wrong road” in the ’60s. Of course road transport has a role, and always will. But I sometimes wonder how many of you guys are closely associated with the road transport lobby.

krazykiwi

The Interislander Line in private hands was quick to shaft out of business everyone who attempted to run fast ferries in competition with them. So clearly there’s money in that arm of the business.

IIRC one of the main shaftings was NZ Railways buying land at Clifford Bay, an alternative site to Picton. This site was of interest to compeditors and would have massively increased the performance of the cross-straight shipping service. I think it’s still owned by the govt and/or Interislander folks. I’m not certain of the timing of this purchase though, so could have been NZ Railways as they were then, or Interislander.

RRM

I like having state-owned highways everywhere so that I can move freely about my country. But I don’t expect to ride state-owned buses everywhere.

It would be interesting to see what would happen if railway rolling stock was sold off, and state ownership of the rails signalling and traffic control remained.

E.g:
(1) The coal trains Running Westport-CHCH via Otira gorge could be offered to Solid Energy (or a 3rd party).
(2) The milk trains running Hawke’s Bay to Hawera (?) could be offered to Fonterra (or a 3rd party).
(3) The tourist passenger trains e.g. Northerner, Southerner, Tranzalpine etc could be offered to the Steam engine preservation societies, at least two of those are capable of operating on a professional footing, and own multiple locomotives with performance at least equivalent to the Kiwirail locomotives currently doing the work. Kids like steam engines… so do a lot of their parents 🙂

RKBee

I thought English was a tight arse on spending… don’t all the National MPs tell us this before they spend up large… as if we should be thankful… there should be a new name for it “Greek Spending”… It’s hard to see any light at the top of the hole the holes so deep from borrowing and now were still borrowing more to support unproductive shit like this.

…the problem is with the size of New Zealand’s economy and the size and shape of the country rail will never be viable without subsidies…

So how much are the road freighting companies paying towards the construction of Steven Joyce’s “Roads of National Significance”? And how much is the government subsidy to them being able to use those new roads?

Repton

I am all for stopping subsidies, of course that would mean that your $.5.00 train ride will now cost you $64.37 because the private motorist is no longer going to have to subsidise public transport.

There are two separate issues here: moving goods around, and moving people around.

A1kmm was talking about freight: of the three options (ships, trucks, trains), trucks are apparently the most heavily subsidised. So perhaps kiwirail would be better able to compete if trucks paid realistic road-user charges. Or perhaps it is a net economic win for us to subsidise fright — in which case, we shouldn’t automatically decline to subsidise trains, but rather we should ask if it’s better value for money, compared with subsidising trucks.

On the other hand, you’re talking about moving people. Consider Wellington, for example: many people in Wellington take the bus or the train to work. If there were no public transport, or if public transport were priced too high to offset the inconvenience of using it, then most of these people would drive to work instead. This would greatly increase traffic and parking pressure, leading to delays and enormous amounts of wasted time. The inefficiency would cost the economy a lot of money. So transport planners instead make the choice to subsidise public transport, in order to more efficiently get people where they need to go.

GPT1

GPT1

toad (2185) Says:

May 18th, 2010 at 5:38 pm
@KiwiGreg 5:29

…the problem is with the size of New Zealand’s economy and the size and shape of the country rail will never be viable without subsidies…

So how much are the road freighting companies paying towards the construction of Steven Joyce’s “Roads of National Significance”? And how much is the government subsidy to them being able to use those new roads?

This is an interesting point. I have often wondered whether road and rail compete on an even playing surface – ie does road contribute its fair share through diesel miles to the upkeep and development of roads? It may well be that the answer is yes but I would be interested to know one way or the other alhough I have my suspicions that kiwigreg is correct – there is just not critical mass to make rail economic.

GPT1

toad (2185) Says:

May 18th, 2010 at 5:20 pm
Kiwirail is actually making a modest profit.

The problem is that decades of underinvestment in maintenance and infrastructure (both by governments from yesteryear and by private enterprise who effectively asset-stripped it when it was privatised) mean that modest profit is nowhere near what is needed to fund the capital investment that it needs to be viable in future.

Ok, I’ll bite. So how is this modest profit worth upwards of $2b of taxpayers money? And IF it had been asset stripped etc why does that make it a good deal to buy back?

Steve

wreck 1080 is right.

How come Mr Cullen is not in jail? Politicians don’t go to jail huh?
That must be why Michael Cullen and Helen Clark stepped down on Election night.
How come Clark is not in jail? well she is really but enjoying it, just as GANG MEMBERS like to be in jail to control the crims

Patrick Starr

“The problem is that decades of underinvestment in maintenance and infrastructure (both by governments from yesteryear and by private enterprise who effectively asset-stripped it when it was privatised) mean that modest profit is nowhere near what is needed to fund the capital investment that it needs to be viable in future”

so what you’re saying Toad is that the sale of this decades of underinvestment in maintenance and infrastructure, asset-stripped trainset was reflected in the purchase price?

Tauhei Notts

Jack5 at 3.25 p.m.
Could you please expand upon your comment that the tunnels between Auckland and Otiria are too small for shipping containers.
I had read about 18 months ago where the chairman of Northland Port suggested that if one factors in the exceedingly expensive land that the Auckland port occupies, that use of Marsden Point and Mount Maunganui would be more cost effective, with a good rail system, than using Auckland port.
You obviously have a good knowledge on this subject and your comments would be welcomed.

Jeremy Harris

I think we need to realise both the trucking industry and the rail industry are subsidised in New Zealand (trucking more so than rail) and we are not comparing apples with apples, in my opinion the following things need to happen if we are to get efficient transport in NZ:

– Ontrack needs to be taken out of Kiwirail and placed under the NZTA. Currently capital rail projects are competing with general Treasury funds (i.e. Health and Education) for funding rather than the National Land Transportation Fund even though the NLTF pays for subsidies for public transport as road users receive most of the benefits. Surely it makes sense for us to be comparing upgrades to the North Auckland Rail Line against Puhoi to Wellsford and the Waterview SH Tunnel to the CBD rail tunnel, instead of Puhoi to Wellsford against the Waterview Tunnel and the CBD rail tunnel against vote Health?

– We need to accept that a public body must control the public transport network in our cities with private operators operating tendered routes. even the WTO accepts this in principle by saying an entire city’s network should be on a tendered contract, amending the Public Transportation Management Act back to a fully deregulated state would be a MASSIVE mistake as sadly full deregulation did not work.

– We know that Rail receives a $90 million dollar subsidy a year, we need a review to calculate the amount trucking companies receive and then work to eliminate both.

– Our Benefit to Cost Ratio process is based on the UK and US models both of which have changed in the last 10 years, we need to review this especially the principal (or more accuartely the value) of “time savings” and the lack of acknowledgement of the principal of “induced demand” which is almost always underestimated and perceived as a good thing.

Tauhei Notts

The biggest subsidy to the road transport industry comes from the private motorist.
I saw it written several years ago that a 38 tonne truck in one journey can do more damage to a road than 24,000 jouneys by a mini motor car.
Now, compare that truck’s road user taxes with the petrol taxes on those 24,000 journeys.

Jeremy Harris

@Tauhei Notts: It’s not just that simple, the damage caused by a vehicle is based on it’s weight with damage increasing by the power 4, this also means not only is more damage caused by trucks than private motor vehicles, but the capital costs of roads are much higher as we have to build our roads many times thicker for trucks… Local rates pay for 50% of local rates in a direct subsidy to the trucks that use them…

So ultimately I think we need to try to figure out exactly what subsidies rail and trucks are getting and then eliminate them, so road and rail can compete fully…

By also moving Ontrack to the NZTA and allowing both road and rail to compete on an even paying field for funding and eliminating subsidies is surely something those on the right can support and work toward, instead of constantly denigrating rail while ignoring trucking subsidies..?

Repton

“road subsidies” doesn’t make sense; no one’s subsidising roads because they’re public anyway.

You could say “truck subsidies = bad”, but I didn’t say that. I think it’s unfair to expect kiwirail to make a profit on freight without subsidies, when it is competing with trucking companies that are subsidised.

That doesn’t mean the subsidies are bad, though. Possibly you could make a case that subsidising freight has a net benefit to the economy. But I don’t know enough to make this case.

But “pubic transport subsidies = good”, yes, sure. Not indiscriminantly, but it makes a lot more sense to put 50 people on a bus to get them into town, rather than sending 30-50 individual cars. Yet most of those 50 would probably prefer to take their car, so the price has to be low enough to make it worth their while.

emmess

So how much are the road freighting companies paying towards the construction of Steven Joyce’s “Roads of National Significance”? And how much is the government subsidy to them being able to use those new roads?

Nothing, because roads are paid for from petrol tax
Look, I am more than happy for petrol tax to be removed and private companies allowed to build roads and charge tolls.
But I know what people will start jumping up and down about that if it were to happen.

This is madness. At the same time as their spending more cash on rail they will also have to raise rail transport prices because the subsidies won’t be enough thus discouraging rail use and thus needing more subsidies to prop it up.
Meanwhile by midnight this Sunday we will have borrowed another $240 million.
Greece, Ireland, Spain, Italy, Portugal: here we come.

ben

How does an investment that does not cover its cost of capital, which rail has not achieved uner any management, be it public or private, since the 1930s, increase productivity? It can’t. Joyce is lying.

labrator

@toad Maybe I’m misreading the report you linked but it says:
“Proft after tax excluding capital grants (69.1) ” I thought the brackets meant negative. So if they didn’t have capital grants of $200 Million dollars, they wouldn’t have made a profit? Can you confirm my reading of this report?

I’m sure if you could make $125.6 million profit on the $300 million revenue then some people would be interested in owning it.

When Labour renationalised the Rail they knew exactly what they were doing, this was part of their scorched earth policy for the incoming National Party. They bought it back when they were behind in the polls in double digits and fully aware of ACC falling over and that their spending was out of control.

They knew that National wouldn’t sell the rail and therefore guaranteed that the Nats were hamstrung into providing funds to it if it meant they wouldn’t be able to further their own agenda. Cullen and co should be strung up for this as they knew bloody well the country could not sustain the railways and pursue tax cuts at the same time.

Sell it now and stop future governments from screwing the taxpayers like this.

ben

Toad is wrong about asset stripping. When Tranzrail was privatised, the new owners massively increased investment in maintenance, nd brought the network back up to standard. Only once it became clear that Kiwis were not going to make the move from road to rail did the business case collapse and investment fall.

Re: road vs rail subsidies. Road user charges raise approximately the money required to cover road maintenance and cost of capital. Therefore road is not subsidised. Road users pay their way. Air passengers pay their way. Sea freight pays its way. Rail does not pay its way, not even close.

The environmental benefits of rail are non-existent, once the environmental cost of mining and smelting all the steel required for a rail system is accounted for. Heavy rail does produce lower emissions per mile than trucks, but this benefit is mostly destroyed once construction and maintenance is accounted for – which are enormous for capital-intensive rail.

labrator

@toad Where is the modest profit you talk of?
“Proft after tax excluding capital grants (69.1) ” There was no detail of what a capital grant is or who it came from but I suspect that it’s money from the government to prop it up. So surely if you take that away, it actually lost $69 million dollars in 6 months?

Roads do NOT pay their way. As has been mentioned many many many times, local roads (which comprise the vast majority of roads in New Zealand) are generally around 50% funded by rates. If that’s not a public subsidy then I don’t know what is.

Jeremy Harris

Ben obviously hasn’t read the thread Jarbury or lacks the ability for rationality…

The right should be trying to help solve the problems of cross-subsidisation of local roads users and state highways users via RUCs, the externalised road and parking costs (which despite being externalised we pay anyway), the lack of competetion in transport capital spending, our screwed up BCR process and, yes rail subsidies… Instead many seem to blindly repeat the dogma drummed in by the RTF and Nat Party, “roads pay their way, roads pay their way”…